Reaganomics: Too Many Voices

The chorus of advisers is singing off-key

They've all sold out, every one of them." That dour assessment came from Jude Wanniski, a fanatic believer in supply-side economics, after a visit to the White House last week. By "they" he meant members of the President's economic team, who in Wanniski's zealous view have all but abandoned supply-side theory—one of the basic doctrines of Reaganomics.

The economic religion preached by Ronald Reagan has always accommodated the beliefs of two different sects. On one side of the aisle sit the supply-siders, who believe that by slashing taxes Washington can stimulate economic growth: on the other side sit the monetarists, who believe that Washington can slow the inflation rate by tightening the nation's money supply. Now, nagged by persistently high interest rates and the threat of a recession, this uneasy choir of Reagan's economic experts is no longer singing as if with one voice, and the cacophony can be heard from Wall Street to Capitol Hill. True believers in Reaganomics, of course, can justifiably argue that their religion is not a failure, since its trial has only just begun.

One wanderer from the true faith appears to be Treasury Secretary Donald Regan, who along with Budget Director David Stockman and Council of Economic Advisers Chairman Murray Weidenbaum is a member of Reagan's "economic troika." Regan last week called upon the Federal Reserve Board to loosen the tight money supply. He merely wanted the Fed to honor its own targeted growth rates for the money supply and avoid choking the economy, but to monetarists looser money is absolute heresy.

Weidenbaum called Regan and asked him, "What's going on here? We've got to be talking with one voice." The CEA chairman told Regan he agreed with the Secretary's statement in principle but was opposed to the Fed pumping more money into the economy now. Then, at a breakfast meeting with reporters the next day, Stockman implicitly contradicted Regan by arguing that the Fed should keep the brakes on the money supply. As Regan continued to attack the Fed's tight money policy on a two-day speaking tour, Treasury Under Secretary Beryl Sprinkel tried to get his boss to soften the rhetoric. Regan, however, refused to include in his speeches the suggested changes dictated over the phone by Sprinkel's office. At week's end it became clearer why Regan seemed so sure of his footing. Presidential Counsellor Edwin Meese told the Business Council at a meeting in Hot Springs, Va., that the President agrees with his Treasury Secretary on the need for the Fed to increase the money supply slightly.